12 May 2018

Safety, going backwards

Charles Hugh Smith, writes about US attitudes to health and safety:

If you've bought a new vehicle recently, you may have noticed some "safety features" that strike many as Nanny State over-reach. You
can't change radio stations, for example, if the vehicle is in reverse. ... The narrowness of this obsession with safety comes into focus if we ask: how
can a society so obsessed with safety have spawned an opioid addiction
crisis that kills tens of thousands of people and ruins the lives of
millions of Americans?
How Safe Are We? Our Blindness to Systemic Dangers, Charles Hugh Smith, 10 May

An excellent question. The safety bureaucracy has goals that differ markedly from those of the health care sector, and both have goals that have little to do with maximising the well-being of citizens per dollar spent. And that should be the guiding criterion for both health and safety: from the policy point of view, they shouldn't be distinct.

Policy decisions about health policy, broadly interpreted to include safety, are heavily influenced by the public profile of a disease or its victims, rather than on what would best meet the needs of society. It’s also a question of diet, exercise, transport, and culture. Recent research shows, for instance, the beneficial effects on health of green spaces in our cities (see here (pdf) for instance). The way government is structured, with its discrete bureaucracies and funding bodies, makes it unlikely that such benefits will influence funding decisions.

We cannot expect a government nor any single organisation to identify the huge numbers of variables, with all their time lags and interactions, that influence the nation’s health - and to do so dynamically, taking into account our rapidly expanding scientific knowledge. We can, though, devise a system that rewards people who explore and implement the most cost-effective health solutions, even when circumstances and knowledge are changing continuously. I have tried to show how this can be done with my essay on Health Bonds, which would aim to distribute scarce government funds to where they would do most good, as measured by such indicators as Disability Adjusted Life Years. Under a Health Bond regime, investors in the bonds would have continuous incentives to maximise their returns on the bonds at all times: their objective, assuming we have carefully defined our targeted health goal, will be exactly congruent with those of society. Bondholders might well decide that, for instance, we should implement measures to switch off the ability to flip radio stations while a car is going backwards - but only if they think that to be one of the most cost-effective ways of reaching society's health goal. Indeed, Health Bonds would ensure that every decision, every activity, that bondholders contemplate or implement will be entirely subordinated to that objective. A stark contrast with the current system, under which officials have goals entirely distinct from, and sometimes in conflict with, the broader interests of society.

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Social Policy Bonds

See the Social Policy Bonds website for overviews and links to articles, papers, news and more about Social Policy Bonds. Click on the image in the panel below to download a 2400-word article published by the Institute of Economic Affairs, London.

Social Policy Bonds in 2400 words

Social Policy Bonds in the media

25 May 2018: a short article on Social Policy Bonds and their possible application in India, appears on Market Express (India). It is by Dr Ashok V Desai and titled Incentivizing welfare.

9 October 2015: An article by Greg Bearup on the genesis of the Social Policy Bond idea, and application of a version of it in Australia appears in the Weekend Australian Magazine. (The article can also be downloaded as a pdf from here.)

October 2013: Professor Robert Shiller of Yale University, is named as one of the three winners of the 2013 Nobel Prize in Economics. His Nobel Prize lecture (pdf) delivered on 8 December, mentions Social Policy Bonds. Professor Shiller has for many years encouraged my work on Social Policy Bonds, beginning in late 1996 when he sent me this letter.

3 May 2012: An audio talk by Nobel Prize winner Professor Robert Shiller at the London School of Economics, in which Social Policy Bonds are briefly mentioned, is available here.